How UK-based edtech startup Perlego aims to be the ‘Spotify’ for textbooks

Perlego, an online subscription service for textbooks, has received an initial investment of £500,000 and tied up with top publishers like Bloomsbury and distributors like Ingram.

Every college by default has one shop outside the premises – a stationery store with the mandatory photocopy machine. There isn’t a single student who hasn’t rushed to photocopy notes or reference textbooks. This - in the age of Netflix and Spotify - was something that Gauthier Van Malderen found really amusing.

As a student at the University of Cambridge, he would end up buying several textbooks, but most times the use of those books was limited and didn’t extend beyond the timeline of the course.

“I always felt that like Spotify or Netflix, there needed to be a subscription service for books,” Gauthier says. This thought led to the birth of Perlego, an online subscription service for textbooks.

Team @ Perlego

On-boarding publishers

Gauthier’s research showed that textbook prices have risen over three times since 1977 to 2014 - and it’s been a whopping 1,041 percent rise.

Keen to solve this problem, Gauthier, decided to put a business plan in place with his friend, Matthew Davis.

He began by talking to publishers to understand if the model would work and found that publishers were receptive as piracy of books was a major challenge.

The more Gauthier researched, the more viable the idea of Perlego felt. The startup began operations in August 2016, and he was also able to raise £500,000 in angel investment.

Working on a subscription model, the platform offers university students unlimited access to over 200,000 titles for £12 a month.

The free service lets students sign up for free and offers the option of reading over 50,000 major reference materials and books. If subscribed for the premium service, which costs £12, the student can read over 150,000 e-books and publications across different subjects and courses.

“We have been able to onboard over 70 publishers. We are able to monetise every single user on our platform,” Gauthier says. The Perlego team pays back the publisher based on the consumption pattern of the student under a premium model.

The working model

Citing an example, Gauthier says if a student reads five pages of a particular book, they pay the publisher for those five consumed pages.

A team of nine members, Gauthier says the number of pages a student reads depends on the course over the year. For a core economics student, the page count would be between 600 and 800 pages a year. If a student is studying English literature, s/he possibly will read 2,000 to 2,500 pages per year.

While the team refused to share the amount that the company charges for the pages read, and their revenue details, Perlego claims to be growing at a rate of 53 percent month on month.

“While publishers understand the need for something like Perlego, they are still resistant to the idea. We are disrupting an industry where we are making a huge physical textbook go away,” Gauthier says.

As of July this year, the team had signed up with Bloomsbury and got more than 7,000 of its titles on the platform. Gauthier adds that they have recently signed up with Ingram, one of the biggest distributors across the world.

But the team realised that while everyone today is tech savvy, it is important to build a product that works well. Gauthier says what they have essentially done is build a streaming service for books, something that had not been done before.

Using a hybrid model

“Since we pay the publisher based on the number of pages a student reads, we had to build an algorithm that detects and track the pages read for every textbook,” Gauthier explains.

Starting with a beta launch in London in January, Perlego follows a hybrid B2C and B2B model. The team reaches out to both students and universities.

Gauthier adds that the B2B model helps build stability, while the B2C model gives the team reach. “We have created an individual book page of every book on Perlego, making search simpler,” he says.

The team claims to have over 36,000 users. Gauthier says 17 percent of Perlego’s traffic comes from India.

The edtech market and the future

Gauthier believes India is the startup’s fastest growing market in terms of the number of students. He adds that they are looking at India before hitting the US market.

Edtech in India is a fast-growing segment. Byju’s, one of the biggest edtech players in the country, caters to the K12 segment. Tutoring, the largest segment in parallel education, is expected to grow at a CAGR of 15 percent, from $11 billion in 2014 to $16 billion in 2017, while test preparation will grow from $2 billion to $4 billion at a CAGR of 25 percent during the same period.

At $24 billion annual private spend, K12 is the largest sub-segment and it is growing at a CAGR of 11 percent. It is expected to grow to $33 billion in 2017, serving a population base of approximately 359 million children in the age group of 5-19 years.

While English literature is the strongest subject for Perlego, the team believes that science, technology and mathematics are next in line.

While there are platforms like Scribd and Oyster, Perlego claims to be different and continues to focus on textbooks. “Our dream is to become an online world library and the beauty is that what we are doing is scalable,” Gauthier signs off.